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Rediff.com  » Business » Govt may seek crypto log on transactions from banks, exchanges

Govt may seek crypto log on transactions from banks, exchanges

By Shrimi Choudhary
March 31, 2022 17:11 IST
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The tax authorities may tell banks and crypto exchanges to report transactions of virtual digital assets (VDAs) as the government begins taxing gains from cryptocurrencies and non-fungible tokens from April 1.

Crypto

Photograph: Dado Ruvic/Reuters

So far, the tax department has relied on voluntary disclosures on transactions of VDAs.

Once implemented, the sale and purchase of digital assets will reflect in the Annual Information Statement (AIS).

The AIS contains details of at least 46 of the financial transactions done by a taxpayer in a financial year.

 

The move will ensure that the details about VDA-related transactions are available with the authorities on a real-time basis, and there would be lower chances of revenue leakage or their going unexamined.

“Once the taxation rules are in place, the department may deliberate whether to mandate the reporting of digital asset transactions as part of specified financial transactions (SFTs) furnished by prescribed entities,” a senior official told Business Standard.

However, SFTs typically record transactions exceeding the threshold. They include investment and expenditure by a taxpayer in a financial year.

“We need to consult and see whether a certain threshold ought to be set for reporting,” the official added.

Making VDA transactions part of the AIS may reduce chances of any mismatch in information, said tax experts.

In the case of a mismatch, taxpayers can inform the department about it. If the mismatch is not conveyed, it may be assumed that the information in the AIS is correct and the Income-Tax (I-T) Department may ask one to explain it.

“Capturing VDAs in the AIS will bring them in the tracking system.

"This will help the authorities to examine the details,” said Sanjay Sanghvi, tax partner, Khaitan &Co.

The I-T department collects information about the income received and material transactions done by an individual from various sources.

It contains information about the income earned from various sources such as salaries, dividends, interest from savings accounts, recurring deposits, sales and purchases of equity shares, bonds, mutual funds, etc.

The statement also contains information related to tax deducted at source (TDS), tax collected at source, and any tax demand or refund.

Last year, the Ministry of Corporate Affairs (MCA) had mandated companies to disclose all transactions in cryptocurrencies or virtual currencies on their balance sheets. The rule is effective from April 1, 2021.

Even though the government is yet to put out the regulations for VDAs or cryptocurrencies, the Union Budget has introduced a new tax regime for the income gained through them, stating that the gains made from the asset transfer would be taxed at 30 per cent. Furthermore, it imposes a one per cent tax deducted at source, or TDS, on payments related to transfers of digital assets.

The Central Board of Direct Taxes is expected to put out the terms of taxation by the end of this month.

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Shrimi Choudhary in New Delhi
Source: source
 

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